News From Congresswoman
Nydia M. Velázquez
Representing New York's 12th Congressional District - Brooklyn, Manhattan, Queens
Ranking Democratic Member, House Small Business Committee

For Immediate Release
March 7, 2005

CONTACT: Kate Davis, Allyson Ivins, (202) 225-4038

Republicans Vote No on Helping Small Business Start-ups
Proposal to use re-employment accounts to cover loan costs rejected

WASHINGTON - For the 1.7 million people that have become unemployed since the start of the Bush administration, Congressional Republicans failed yesterday to make it any easier for them to start their own businesses, by opposing an amendment to allow the unemployed to use personal re-employment accounts to cover the cost associated with receiving a start-up loan.

Congresswoman Velázquez, Ranking Member of the House Small Business Committee, offered the amendment, which was rejected with a vote of 202 to 221, to the Job Training Improvement Act. The amendment would allow funds in personal re-employment accounts to be used to help offset the high costs resulting from new fees imposed on the Small Business Administration's (SBA) 7(a) loan program that hinder entrepreneurs' ability to receive a start up loan. These fees on the program, which doubled anywhere from $1500 to $3000, were implemented by the Bush administration at the end of FY 2004. The additional costs on the program have limited the ability of entrepreneurs to access affordable capital

"The goal of the amendment was to help unemployed workers start their own business, create a strong workforce, and boost our economy," Congresswoman Velázquez said. "Some of the most successful companies today were started by those who were unemployed and turned toward business-ownership during times of an economic downturn. What this nation's economy desperately needs right now is a revival of entrepreneurship that will spur more job creation and economic growth. Through this vote, it is clear that Congressional Republicans are only continuing to fail our nation's entrepreneurs."

As the economy continues to struggle, small businesses - that create three out every four new jobs - have historically been responsible for turning the economy around during times of recession. A key factor is business start-ups. During the early 1990's, about 25 percent of laid-off managers over the age of 40 started their own companies. Today the demand is growing as more and more Americans pursue self-employment - the rate of self-employment increased by 3.7 percent from 2002 to 2003.

However, one of the biggest challenges businesses have in the start-up phase is their ability to access capital. The 7(a) loan program - which provides 30 percent of all long term lending - was created in order to help bridge this gap, and spur economic growth in underserved areas. However, the program's ability has been limited due to the high costs that have recently been imposed. Congresswoman Velázquez expressed concern that the Jobs Training Improvement Act did not have more provisions to address the needs of unemployed, and highlighted that the amendment would help those who are out of work make their way toward business ownership.

"This clearly sends a disappointing message to aspiring entrepreneurs," Congresswoman Velázquez said. "It is already difficult enough to start a business under the most favorable of conditions, but this vote only made it that much harder for the unemployed to realize the American dream of business ownership."

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